If you get into a wreck on the way home from work, chances are good your car insurance company will be there to help pick up the pieces.
But does your auto insurance policy cover a crash when you use your car for business purposes? It depends.
“While in most cases your personal auto insurance will cover you for basic business use of a personal vehicle, there are situations where it will not,” says Carole Walker, executive director of the nonprofit Rocky Mountain Insurance Information Association.
Most personal car insurance policies contain provisions that restrict coverage for business use, she says.
"The answer to ‘Am I covered?’ really depends on how you use your vehicle for business purposes,” Walker says. “What type of car are you driving? Does the car belong to you or someone else? What business are you in?”
Bob Passmore, senior director of personal lines policy at the Property Casualty Insurers Association of America, a trade group, says certain types of business activity are likely to put your coverage in jeopardy.
“If you are a taxi or limousine (driver), or you're doing daily package deliveries, those are things that might trigger the livery exclusion,” he says. The livery exclusion refers to an insurer’s reluctance to cover vehicles that transport people or goods for a fee.
Passmore says you also may be courting trouble if you tell an insurance company your vehicle is one thing – such as standard van or truck – when, in fact, it’s something else, such as a truck you’ve modified with special equipment geared toward business purposes.
Passmore and Walker agree that common sense usually indicates whether an activity is likely to be covered.
“If you are delivering something to somebody on a one-time occasion, generally you are not going to run into trouble,” Passmore says.
Walker says most people use their cars at some time or another to drive to a business meeting, to the airport for a business trip or to an office supply store.
“This is generally covered,” she says. “What can get sticky is how you are using your car for business. Is the vehicle itself being used for commercial purposes — for example, to transport people or products?”
Talking to your insurer
Rather than guessing whether you’re covered, it is crucial to talk with your insurance company or agent to find out what is and is not covered, Passmore says.
“If you are consistently working as a pizza delivery person, you probably want to talk to your agent,” Passmore says.
Insurers set rules about which business-related activities fall under the protection of a personal policy. These rules vary from company to company, so it’s critical to know exactly what your insurance company will cover.
“If you have any doubt, you should talk to your agent or company first,” Passmore says. “The best time to consider these things is before something happens.”
Once you sit down with your agent, he or she likely will ask how often you use your vehicle for business use and in what manner. It’s best to lay all your cards on the table, Walker says.
“The bottom line is be honest with your insurance carrier about how you use your car for business, so you have the coverage you need,” Walker says.
State law also may determine what is and is not covered. For example, Walker says that in some states, insurers can exclude personal auto insurance policies from covering claims when vehicles are used to deliver food or other property for a fee.
“However, this can vary by state,” she says, “For example, in Colorado there is case law that says your personal auto policy does cover you for pizza delivery.”
Business coverage options
If your insurer determines that your business activities are not covered, you may need to take out a commercial auto policy. Such policies typically are designed for fleet vehicles, commercial trucks or shuttle vans, and are priced accordingly, Walker says.
“Purchasing a commercial policy would likely be an expensive alternative,” Walker says.
However, Passmore says, you may be able to avoid that expense by simply adding an endorsement – or add-on – for your personal policy that covers the business activity in question. Such endorsements raise your car insurance costs, but generally are less costly than buying commercial insurance, he says.